THIRD DIVISION

[G.R. No. 156251. April 27, 2007.]

PHILIPPINE REALTY HOLDINGS CORPORATION , petitioner, vs .

FIREMATIC PHILIPPINES, INC. , respondent.

DECISION

CALLEJO, SR. , J : p

This is a Petition for Review on Certiorari of the Decision 1 of the Court of

Appeals (CA) in CA-G.R. CV No. 63791 and its Resolution 2 dated November 19, 2002.
The Antecedents
On December 12, 1989, Philippine Realty and Holdings Corporation (PRHC),
entered into a Construction Agreement 3 with Firematic Philippines, Inc. (Firematic) for
the installation of a sprinkler system in the proposed Tektite Towers, located at Tektite
Road corner Pearl Avenue, Mandaluyong, Metro Manila. The project had two phases —
Phase I (Tower I) and Phase II (Tower II).
The scope of the work to be done by Firematic is provided in Article II of the
Contract, thus:
1.0 The CONTRACTOR, in consideration of the payments to be made
by OWNER, of certain sums of money in the manner hereinafter speci ed, shall
fully and faithfully deliver, perform and undertake to nish and supply all the
materials, tools, equipment, supervision and to do all the skills and labor
necessary or proper for the due completion of the Sprinkler System for the above-
mentioned project, and does hereby warrant and guarantee that the said work and
labor shall be performed in the most proper and workmanlike manner and in full
conformity with the corresponding plans and speci cations duly prepared
therefor and/or the pertinent contract documents. DHaEAS

2.0 The work of the CONTRACTOR shall include, but shall not be
limited to ordering materials, following-up of orders, checking the quantity and
quality of materials within the premises of the construction site, and rejecting or
returning defective materials.

3.0 The CONTRACTOR is hereby expressly required to refer to all

Mechanical, Plumbing, Electrical, Structural and Architectural plans and
speci cations and shall investigate any possible interference and conditions
affecting its contract work.

4.0 All materials supplied by the CONTRACTOR shall be in conformity

with the Sprinkler System specifications prepared by R. Villarosa — Architects.
5.0 It is not intended that the drawings shall show every pipe, ttings,
and valve. All such items, whether or not those parts have been speci cally
mentioned or indicated on the drawings, shall be furnished and installed by
CONTRACTOR, if necessary to complete the system in accordance with the best
practice of Sprinkler System and to the satisfaction of the OWNER. 4
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 Under Article I of the Contract, the following documents were incorporated into
the agreement:
1.0 Sprinkler System Plans: FP-1 to FP-18, all consisting of eighteen
(18) sheets as prepared by R. Villarosa — Architects.

2.0 Fire Protection Specification consisting of Forty-nine (49) pages.

3.0 Bid Documents consisting of the following:

a) Invitation to Bid — One (1) sheet;

b) Instruction to Bidders — Three (3) sheets;

c) Bid Proposals of Firematic Phils., Inc. consisting of Three (3) pages
dated Oct. 31, 1989;

d) Bid Bulletin No. 1 — Fourteen (14) sheets;

e) Letter of Intent dated November 21, 1989 duly signed by the Owner
and the Contractor consisting of Two (2) sheets. 5

Article IX of the Contract enumerates the responsibilities of Firematic relative to

the supply and installation of the sprinkler supplies:
1.0. The CONTRACTOR shall remove all portions of work which the
OWNER or its representative may condemn as in any way having failed to
conform with the corresponding Sprinkler Systems plans and speci cations, and
the CONTRACTOR shall properly make good all such work so condemned by the
OWNER. The cost of making good any/all work shall be solely borne by the
CONTRACTOR. IDScTE

xxx xxx xxx

7.0. The CONTRACTOR warrants the Sprinkler System installations

under this contract to be free from faults or defects in materials and
workmanship for a period of One (1) year from the date of initial operations.
Faults caused by or due to ordinary wear and tear or those caused by the OWNER
or its employees are excluded from this guarantee.

The CONTRACTOR further warrants all equipment and accessories thereto

to be free from defects in materials and faulty workmanship for a period of One
(1) year from the date of initial operation.

The equipment or parts thereof which are found defective within the said
period of guarantee shall be replaced by the CONTRACTOR at no cost to the
OWNER.

On December 11, 1990, PRHC informed 6 Firematic that it had decided to delete
Phase II (Tower II) from the original contract, and consequently, the contract price for
Phase I was reduced to P22,153,424.52. 7 However, by reason of the change orders
approved by PRHC, the contract price was increased to P24,773,376.48. 8
On December 13, 1990, PRHC and Firematic entered into another Construction
Agreement 9 under which the latter undertook to supply, deliver and install the re alarm
system for Phase I of the Tektite Project for a total contract price of P3,780,000.00.
This agreement contains substantially the same terms and conditions as the earlier
contract for fire sprinklers.
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 The Technical Speci cation for Fire Protection 10 (which is an integral part of the
contract) provides, among others:
1.02. QUALIFICATIONS

xxx xxx xxx

D. LISTED AND APPROVED:

When the words "listed" and "approved" appear in the Contract Documents,
or the Standard Speci cations and Codes, they shall be interpreted to require
products to bear labels indicating the listing, or approval of items of equipment,
components, devices, assemblies and apparatus; by an internationally recognized
testing laboratory for the specific service intended.

1.03. STANDARD SPECIFICATIONS AND CODES:

xxx xxx xxx

1. NFPA-20; Centrifugal Fire Pumps 1 1

The contract price and terms of payment for the project are as follows:
The OWNER shall pay the CONTRACTOR for the full, faithful and complete
performance of the works called for under this agreement, a xed amount of
P E S O S : THIRTY THREE MILLION NINE HUNDRED NINETY FIVE
THOUSAND FORTY ONE & 24/100 (P33,995,041.24) ONLY , the manner of
payment of which shall be in accordance with Article V hereof. The contract price
shall not be subject to escalation, except due to work addition approved by the
Owner and the Architect and due to o cial increase in minimum wage as covered
by the Labor Cost Adjustment Clause below. . . . It is understood that there shall
be no escalation in the price of materials. . . . .

ARTICLE IV — ADJUSTMENT OF CONTRACT PRICE

The OWNER or ARCHITECT may, without invalidating this Agreement or the

Contract Documents, order at anytime in writing additional work or alterations by
correcting, altering or deducting from the work to be undertaken or being
undertaken by the CONTRACTOR. All such work shall be evidenced by Change
Orders signed by the OWNER and shall be executed under the conditions hereof
and of the Contract Documents.

No claims for additions or deductions to the Contract Price herein

stipulated by reason of extra or alteration shall be valid unless ordered in writing
by the Owner. The value of any extra work or alterations shall be separately
agreed upon by the parties in writing.
Any value of Change Orders approved shall be considered as part of the
Contract and to be included in progress billing.
ARTICLE V — TERMS OF PAYMENT

3.0. No payment made hereunder shall be construed as a waiver of

any claim against the CONTRACTOR by the OWNER for any faulty workmanship,
materials used or defect in work completed.

On March 30, 1992, Firematic requested 1 2 PRHC for nancial assistance due to
its tight business credit and rising costs. Consequently, the purchases of materials for
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 the project were directly paid by PRHC.
Firematic submitted to PRHC the Catalogue of Peerless Fire Pumps, 1 3 and PRHC
approved the use of 500 GPM (12 LB-F model) Peerless Vertical Turbine Fire Pumps. 1 4
To facilitate the purchase of the approved model and speci cations of the re pumps
from Technotrade Industrial Sales, Inc., and pursuant to the nancial assistance earlier
requested by Firematic, the latter presented to PRHC for approval Purchase Order No.
1 0 8 1 5 dated August 6, 1992. PRHC approved the purchase order. The subject
materials were delivered and eventually installed by Firematic.
On the other hand, the Technical Speci cations for Fire Alarm and Detection
System 1 6 provides:
2.01. FIRE ALARM CONTROL PANEL (FACP):

xxx xxx xxx

B. The FACP shall be solid state design with full capability for sensing
automatic detectors, and manual stations and have the provision for integrating
with security system. 1 7

Paragraph 9 of Bid Bulletin No. 1 1 8 dated September 10, 1990 provides that the
requirement for interfacing with Security System Section under Section 2.01(B) is
actually for interfacing with the Building Management System (BMS). 1 9
The materials were installed by Firematic. The project became operational and
was turned over to PRHC, which then issued the Certi cate of Completion. 2 0 The
Municipal Mayor issued a Certi cate of Occupancy in favor of PRHC on January 12,
1993. 2 1
In the meantime, PRHC requested the Connel Bros. Co., Philippines for a
quotation of the Peerless UL/FU Fire pump similar to those installed by Firematic in
Tektite Tower I. 2 2 However, Connel Bros. Philippines, Inc. replied by letter dated
September 2, 1993 that it would be di cult for them to trace whether they had records
of transactions with Technotrade-USA, because the pump model and serial number that
PRHC furnished were not of Peerless origin." 2 3
Meanwhile, on October 14, 1993, Firematic billed PRHC P1,402,559.93 for the
balance of the amount of the automatic sprinkler supplies installed. 2 4 However, PRHC
rejected the claim. On October 20, 1993, PRHC, through counsel, sent a letter 2 5 to
Firematic claiming that, based on its Purchase Order, the brand "Peerless" should have
been used; however, the manufacturer of the brand (Peerless Pump Co., USA), did not
have any record of having manufactured the pumps that Firematic delivered and
installed on the Tektite Towers project.
Firematic did not respond to the letter. Instead, its managing director, Ms. Jojie
Gador, went to the Fire Department of the City of Pasig and inquired about the re
incident that occurred at Tower II while construction was ongoing. 2 6 In response to the
inquiry, the City Fire Marshall issued a report 2 7 dated June 10, 1994 stating that "said
re could have turned into a con agration size without the swift response of the
company guards on duty plus the existing firefighting equipment installed thereat."
In a letter 2 8 dated March 2, 1994, Connel Bros. stated that Peerless Pump Co.
never had direct negotiation with Technotrade, and as such, the latter is not a dealer of
"Peerless" pump.
On January 12, 1995, Firematic sent its nal billing 29 and a demand letter 3 0
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 prepared by its counsel to PRHC for the payment of the latter's balance of the contract
price amounting to P3,919,283.13, including the unacted charge order attached
thereto. IAEcaH

In answer to the nal billing of Firematic, PRHC denied 3 1 liability for the following
reasons:
1. [The] installation is incomplete and has not been fully
commissioned.

2. [The] Fire Alarm Panels could not be interfaced with Building

Management System as required in [the] contract . . . .
3. [The] Fire Alarm Panels do not follow the speci cations required in
the contract. HDTISa

In a letter 3 2 dated March 6, 1995, PRHC informed Firematic that all the re
pumps and accessories supplied by it shall be removed, and the cost of replacement,
including the labor cost of the installation, would be chargeable to its account. Again,
Firematic failed to respond. 3 3
In the meantime, PRHC purchased the replacement for the "defective" materials
installed by Firematic, as evidenced by the following Purchase Orders: (1) P.O. dated
November 15, 1993 for pumps obtained from Connel Bros. Company Pilipinas, Inc.
amounting to US$ 61,925.00; 3 4 (2) P.O. dated October 25, 1994 for re and jockey
pumps installation amounting to P318,750.00; 3 5 and (3) P.O. dated October 4, 1995
for materials purchased from Electro Systems, for a total amount of P450,000.00. 3 6
The Peerless pumps bought by PRHC to replace the pumps Firematic had installed
were higher in terms of capacity. 3 7
As a result of the continued refusal of PRHC to pay its unpaid obligation,
Firematic led a Complaint for Collection for Sum of Money plus Damages 3 8 against
PRHC. The case was ra ed to Branch 66 of the Regional Trial Court of Makati, and was
docketed as Civil Case No. 95-394. aIcDCA

Firematic alleged in its complaint that when it followed up its nal billings and
retention money, the PRHC, under new management, refused to pay its obligation. It
further claimed that the PRHC's reason, that the sprinkler system and re alarm system
were defective was so imsy because the sprinkler and re alarm systems were
certi ed to be in good condition. Firematic also asserted that because of PRHC's
continued refusal to settle its valid and outstanding obligations, it suffered actual
damages in the amount of P5,897,736.44; temperate or moderate damages in a
reasonable amount of P500,000.00; and attorney's fees equivalent to 25% of the
amount recoverable. The complaint contained the following prayer:
WHEREFORE, Premises Considered, it is respectfully pray (sic) of the
Honorable Court that after trial a judgment be rendered ordering the defendant —
1. To pay the amount of P5,897,736.44 plus legal interest of 1% per
month until fully paid from the filing of this complaint;

2. To pay temperate or moderate damages of P500,000.00;

3. To pay attorney's fees in the amount equivalent to 25% of the
amount recovered;
4. To pay the cost of suit.
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 Further prays for such other reliefs and damages under the premises. 3 9

In its Answer, 4 0 PRHC countered that plaintiff had no cause of action, and that
the complaint is premature because the case should have been submitted rst to
arbitration. It also alleged that out of the total amount of P23,400,869.41 billed by
Firematic, it already paid the total sum of P22,098,302.45. However, after such
payment, it discovered that Firematic had violated the terms and conditions of the
contract, and that the actual works completed in accordance with the technical
speci cations amounted only to P21,915,869.41. It likewise claimed that there was in
fact an overpayment of P182,433.04 insofar as the re sprinkler contract was
concerned. As to the re alarm contract, PRHC alleged that it paid a total sum of
P3,247,966.49, but it turned out that the works actually completed in accordance with
the speci cations of the contract amounted only to P2,857,655.10. PRHC insisted that
Firematic committed fraud in the performance of its obligations under the two
contracts in (1) actually delivering and installing pumps that were not genuine
"Peerless" products, non-UL listed and non-FM approved; (2) supplying and installing
"Mitech" brand instead of "Firescan 5027" as approved during the bidding; (3) installing
re alarm control and data gathering panels that were not compatible with each other;
and (4) installing a re alarm system that could not be connected or interfaced with the
Building Management System.
In its Reply, 4 1 Firematic alleged that the provision on arbitration had force and
effect only during the execution and performance of the agreement or contract and not
after its termination. It further asserted that the total contract price, including the
change orders, increased to P25,277,559.75 but PRHC only paid P21,087,191.89; thus,
there was a balance of P4,190,367.86. It likewise contended that though there was an
approved speci cation, revisions were made due to unavailability of materials.
Consequently, with the conformity and approval of PRHC of the description speci ed
under P.O. 108, the latter made direct orders from Technotrade; PRHC also made direct
payments to it. Firematic pointed out that the materials delivered were under warranty
for one (1) year, and since PRHC had no complaints after the lapse of the warranty, it
was under the impression that the materials had met the speci cations. It insisted that
PRHC could not complain that the re alarm system could not be interfaced with its
system because it was the latter's responsibility to provide for an interface device. AEcTCD

On September 1, 1998, PRHC led a Motion for Leave to Amend Answer to

Conform to Evidence 4 2 which Firematic opposed. On October 26, 1998, the trial court
granted the motion and thereby admitted the Amended Answer. 4 3 In its Amended
Answer, PRHC claimed that, with respect to the re sprinkler system, the actual works
completed by Firematic amounted to only P20,613,302.45. Thus, it (PRHC) made an
overpayment of P1,485,000.00. As to the re alarm system, the works actually
completed in accordance with the technical speci cations amounted to only
P2,597,966.49. Again, there was an overpayment of P650,000.00.
By way of counterclaim, PRHC averred that Firematic's violation of the contract
and its misrepresentation caused the former to suffer actual damages in the amount of
P2,135,000.00, $61,925.00 and P450,000.00; the baseless and unfounded suit caused
it to suffer besmirched reputation, for which Firematic should be ordered to pay moral
damages in the amount of P20,000.00; for the public good and to deter others similarly
minded from committing fraud in the performance of the contract, Firematic should be
ordered to pay exemplary damages in the amount of P10,000.00; and since the
unfounded suit compelled PRHC to obtain the services of counsel, Firematic should be
made to pay 25% of the amount recovered as attorney's fees. 4 4
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 After trial on the merits, the RTC ruled in favor of PRHC. The fallo of the decision
4 5 reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered dismissing the

above complaint and ordering the plaintiff to pay the defendant the amount of
$61,925.00 or P1,610,050.00 (at P26.00 per dollar exchange rate when the
Peerless pump were bought) representing the purchase price of the genuine
Peerless re pumps, P318,750.00 representing the amount to install the
replacement re pumps, P450,000.00 representing the amount of supply and
installation of replacement re alarm panels plus P25,000.00 as attorney's fees.
HCETDS

SO ORDERED. 4 6

The RTC concluded that in failing to deliver genuine Peerless Pumps as agreed
upon, and to install re alarm system that could be interfaced with the system,
Firematic failed to comply with the technical specifications of the contracts. 4 7
Aggrieved, Firematic appealed to the CA, raising the following errors:
I.
THE HONORABLE COURT ERRED IN FINDING PLAINTIFF-APPELLANT OF HAVING
FAILED TO DELIVER AND TRANSFER TO DEFENDANT-APPELLEE SPRINKLER
SYSTEM AND FIRE ALARM SYSTEMS IN ACCORDANCE WITH THE CONTRACTS.
II.
THE HONORABLE COURT ERRED IN FINDING THE PEERLESS FIRE PUMPS AS
FAKE.
III.
THE HONORABLE COURT ERRED IN FINDING PLAINTIFF-APPELLANT OF HAVING
FAILED TO COMPLY WITH THE TECHNICAL SPECIFICATIONS OF THE FIRE
ALARM SYSTEM CONTRACT. HCaDIS

IV.
DEFENDANT IS LIABLE TO PLAINTIFF-APPELLANT FOR THE DAMAGES PRAYED
FOR. 4 8

On July 10, 2002, the CA rendered judgment reversing the decision of the RTC.
The fallo reads:
WHEREFORE, the foregoing considered, the Decision appealed from is
hereby ANNULLED. The appellee is hereby ORDERED to pay, in view of the above
premises and computations, the sum of P852,566.96, with legal interest from 7
March 1995, the date the complaint was filed. 4 9

The CA declared that PRHC's belated claim was highly doubtful since PRHC had
ordered the pumps from Technotrade, albeit through the Firematic, and were inspected
and scrutinized by its consultants who are experts in their elds. 5 0 The appellate court
likewise agreed with Firematic that the documents presented in evidence by PRHC to
prove that the pumps supplied by Technotrade were not genuine "Peerless" pumps are
inadmissible for being hearsay. 5 1 According to the CA, it is possible that it was not the
appellant but Technotrade that was guilty of fraud in supplying dubious pumps to
PRHC. 5 2
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 However, the CA a rmed the ndings of the RTC that appellant committed a
breach of contract in installing the re control panels because of its failure to comply
with the requirement of interfacing with its system. Since PRHC was constrained to
incur P450,000.00 to undo the work of Firematic, it was convinced that the un nished
work amounted to P1,372,507.07.
Thus, the appellate court held that Firematic was liable to PRHC for a total
amount of P1,822,507.07, while PRHC had an unpaid obligation to Firematic amounting
to P2,675,074.03 representing the balance of the contract price. The appellate court
concluded that PRHC owed Firematic P852,566.96. 5 3
On August 2, 2002, Firematic and PRHC led their Motion for Reconsideration
and Clarification 5 4 and Motion for Partial Reconsideration, 5 5 respectively.
On November 19, 2002, the CA issued the following Resolution: 5 6
WHEREFORE, premises considered, the Decision of 10 July 2002 is hereby
MODIFIED, and instead of P852,566.96, the appellee is hereby ORDERED to pay
appellant P762,658.71 with legal interest from 07 March 1995.
The main Decision STANDS in all other respects.

No costs.
SO ORDERED. 5 7

PRHC, now petitioner, seeks to have the appellate court's ruling reversed on the
following grounds:
1. The Court of Appeals committed reversible error when it came out
with a conclusion based on a manifestly mistaken inference or based on
misapprehension of facts, inasmuch as its ndings are contradictory to the
evidence on record. Speci cally, the Court of Appeals committed reversible error
when it ruled that the re pumps supplied and delivered by FIREMATIC to
PHILREALTY conformed to the technical speci cations of the sprinkler system
contract despite evidence to the contrary.

2. The Court of Appeals committed reversible error when it again came

out with a conclusion based on a manifestly mistaken inference. Speci cally, the
Court of Appeals committed reversible error when it unjusti ably disregarded
petitioner's evidence showing the supplied pumps as fakes and not of "Peerless"
origin, on the ground that said evidence is hearsay.

3. The Court of Appeals committed reversible error when it came out

with a conclusion based on a manifestly mistaken inference and based on
misapprehension of facts. Speci cally, the Court of Appeals erred that the
issuance of a Certificate of Completion proved the genuineness of fire pumps and
the compliance with the technical specifications of the contract. 5 8

The threshold issue raised is whether or not the re pumps supplied and
delivered by respondent to petitioner conformed to the technical speci cations of the
contract. EcTaSC

Petitioner argues that while it is true that the particular model of the pumps for
the re control system was not speci ed in the technical speci cations for re
protection, the quali cations of the pumps were nevertheless provided — that the
pumps should be "listed" and "approved" by an internationally recognized testing
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 laboratory for the speci c service intended. 5 9 Pursuant to such speci cation,
respondent in fact submitted for approval the brochure of Peerless Pumps. Petitioner
further insists that it was respondent who brought the source of the fake peerless
pumps into the picture, and as such, it should be the one to return the defective
materials. It insists that the direct payment made by petitioner did not relieve
respondent from its responsibility under the contract. Moreover, petitioner asserts,
because respondent failed to dispute its claim and present proof that the re pumps
delivered were genuine, it had impliedly admitted that the re pumps were not original
Peerless pumps. Petitioner further contends that the issuance of the certi cate of
completion and the fact that the fire pumps were used did not cure their defects.
For its part, respondent contends that the re pumps were inspected, examined
and tested by petitioner's technical staff, and that the latter found them to be
operational. Thus, it cannot now be permitted to belatedly complain. According to
respondent, petitioner admitted that when the re pumps were changed, the
replacement pumps installed by the latter were higher in terms of capacity. Respondent
likewise reiterates that the evidence presented by petitioner to prove that the re
pumps were not genuine is inadmissible in evidence for being hearsay. It claimed that
the CA erred in ordering petitioner to pay to it the principal amount of only
P852,566.96. Respondent maintains that, as shown by the evidence on record,
petitioner owed it P10,399,418.89 for the re sprinkler supplies and re alarm system.
It further contends that the decision of the CA should be modi ed, and prays for the
following relief:
1.) The herein Petition for Review on Certiorari led by Petitioner
Philippine Realty & Holdings Corporation be dismissed for lack of merit;
2.) Petitioner be ordered to pay Respondent the following to wit:

a.) Ten Million Three Hundred Ninety Nine Thousand Four Hundred
Eighteen & 87/100 (P10,399,418.89) Pesos, for the fully completed installation of
the Fire Sprinkler System and Fire Alarm System, ten (10%) percent retention and
(sic) plus legal interest of twelve (12%) percent per annum from July 10, 2002 as
and by way of actual damages;

b.) Five Hundred Thousand (P500,000.00) Pesos as and by way of

exemplary, nominal or moderate damages;

c.) Attorney's fees at the rate of Twenty (sic) (25%) percent of the
award of actual damages above-mentioned;

d.) Such other reliefs and remedies as may be just and equitable under
the premises. 0
6

However, it is an established rule that an appellee (respondent) who is not also

an appellant (petitioner) may assign error where the purpose is to maintain the
judgment on other grounds, but he cannot seek modi cation or reversal of the
judgment or a rmative relief unless he has also appealed (or led a separate petition).
6 1 Thus, due to respondent's failure to institute a separate petition before this Court,
the CA decision must perforce be considered final and binding as to it.
Petitioner insists that the re pumps supplied and installed by respondent are
"not of Peerless origin" because of the following: (1) respondent failed to present
proofs of the genuineness of the pumps; (2) respondent failed to answer petitioner's
letters requiring it to present the aforesaid proofs, thus, estoppel by silence applies;
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 and (3) the manufacturer of the Peerless pumps verbally informed Connel Bros. that the
subject fire pumps "are not of Peerless origin."
We do not agree.
Well-settled is the rule that the party alleging fraud or mistake in a transaction
bears the burden of proof. The circumstances evidencing fraud are as varied as the
people who perpetrate it in each case. It may assume different shapes and forms; it
may be committed in as many different ways. Thus, the law requires that fraud be
established, not just by preponderance of evidence, but by clear and convincing
evidence. 6 2
In this case, petitioner relied on the principle of estoppel by silence, as well as on
Letter No. L/93-272 6 3 and Letter No. L/94-043 6 4 of Connel Bros. to prove that the re
pumps, which respondent supplied and installed, were not genuine. The aforesaid
letters are quoted hereunder:
Letter No. L/93-272
December 15, 1993
PRHC PROPERTY MANAGERS, INC.
5th Floor, Tektite Towers,
Tektite Road, Ortigas Center,
Pasig, Metro Manila
Attention: Mr. Ed B. Banaag, Vice President
Subject: EXISTING FIRE PUMPS AT TEKTITE TOWER I
Gentlemen:
With reference to your letter dated November 15, 1993, please nd
attached a (sic) copy of facsimile message dated December 15, 1993 from
our principal, Peerless Pump, USA. cITCAa

Please take note that they normally trace the authenticity of the pump
through the pump model and pump serial number. It would be then
di cult for the factory to trace whether they have indeed records of
transactions with Technotrade-USA because the pump model and serial
number that you furnished us are not of Peerless origin.
We also enclosed a copy of our Letter No. L/93-063 dated November 16,
1993 for your reference.
We hope the above explanation will enlighten your clarification.
Very truly yours,

E.L. STA. MARIA, JR.

Asst. Vice President
Machineries Department
ELS:LTV
Att.: a/s

Letter No. L/94-043

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 March 2, 1994
PRHC PROPERTY MANAGERS, INC.
5/F Tektite Towers, Tektite Road
Ortigas Center, Pasig, M.M.
Attention: MR. EDUARDO B. BANAAG
Vice President
Subject: EXISTING FIRE PUMPS AT TEKTITE TOWER I

Gentlemen:
We apologize for the delay in our reply to your letter of December 16, 1994
regarding your clarification on the above subject.
Please nd attached a (sic) copy of our Letter No. F/93-071 dated
December 20, 1993 addressed to our principal wherein we enclosed your
above stated letter.
However, inspite of constant follow-ups and reminder, we could not have a
confirmation from our principal on your requested information.
Mr. John Kahren, Peerless Pump's Director for International Sales, verbally
advised that they have no access or capability to verify whether there is
such an organization named Technotrade operating in the U.S.A. They can
only con rm that they never had direct negotiation with Technotrade in
record and as such, Technotrade is not a dealer of Peerless pump.
We hope the above statement will in any way answer your requested
clarification.

Very truly yours,

E.L. STA. MARIA, JR.

Asst. Vice President

Machineries Department

ELS: LTV

Att.: a/s

However, petitioner failed to present the signatory of the letters (E.L. Sta. Maria,
Jr.) to testify on the veracity of the contents of the letters; thus, respondent was not
given the opportunity to cross-examine him. It also appears that the person who signed
the letters had no personal knowledge of the facts stated therein, as he claimed that he
had been "verbally advised" that the manufacturer of Peerless pumps never had direct
negotiation with Technotrade, and as such, the latter is not a dealer of the pumps.
Well-entrenched is the rule that a private certification is hearsay where the person
who issued the same was never presented as a witness. The same is true of letters.
While hearsay evidence may be admitted because of lack of objection by the adverse
party's counsel, it is nonetheless without probative value. 6 5 Stated differently, the
declarants of written statements pertaining to disputed facts must be presented at the
trial for cross-examination. 6 6 The lack of objection may make an incompetent evidence
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 admissible, but admissibility of evidence should not be equated with weight of
evidence. Indeed, hearsay evidence whether objected to or not has no probative value.
67

Petitioner asserts that respondent impliedly admitted that the re pumps it

installed were "not of Peerless origin" because of its failure to dispute petitioner's
accusation and to present proofs that the re pumps delivered were genuine. Thus,
petitioner contends that estoppel by silence applies to respondent. EDATSC

The principle of estoppel in pais applies wherein one, by his acts, representations
or admissions, or by his own silence when he ought to speak out, intentionally or
through culpable negligence, induces another to believe certain facts to exist and such
other rightfully relies and acts on such belief, so that he will be prejudiced if the former
is permitted to deny the existence of such facts. 6 8
We nd the principle inapplicable in the present case. According to respondent's
Managing Director Jojie S. Gador, she did not completely keep silent on petitioner's
accusation. She testi ed that when petitioner refused to pay respondent, she went to
the Fire Department of the City of Pasig and made an inquiry regarding the re incident
that took place at the Tektite project. 6 9 In answer to this inquiry, the Fire Department
issued a Certi cation 7 0 stating, inter alia, that the o ce 7 1 was very much delighted
because the management of Tektite Tower had substantially complied with the safety
requirements of Presidential Decree No. 1185. 7 2 In making such inquiry, respondent in
effect denied petitioner's accusation that the re pumps it had installed were defective;
as such, the principle of estoppel by silence does not apply. HScDIC

Because good faith is presumed, respondent was not obliged to present proofs
of the genuineness of the re pumps it supplied and installed. The burden of proof to
show that the pumps were not genuine fell upon petitioner. However, the records show
that petitioner failed to discharge this burden. Clearly, the evidence relied upon is not
su cient to overturn (1) the presumption of good faith; (2) that private transactions
have been fair and regular; 7 3 and (3) that the ordinary course of business had been
followed. 7 4
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The
Decision of the RTC dated July 10, 2002, in CA-G.R. CV No. 63791, and its Resolution
dated November 19, 2002, are AFFIRMED.
SO ORDERED.
Ynares-Santiago, Austria-Martinez, Chico-Nazario and Nachura, JJ., concur.

Footnotes

1. Penned by Associate Justice Romeo Brawner, with Associate Justices Jose L. Sabio, Jr.
and Mario Guariña III, concurring; rollo, pp. 36-48.
2. Rollo, pp. 50-56.
3. Exhibit "B"; folder of exhibits (vol. II) pp. 8-17.

4. Exhibit "B-1," folder of exhibits, p. 9.

5. Folder of exhibits, pp. 8-9.

6. Embodied in a letter dated December 11, 1990 by Dennis A. Abcede, the construction
manager of the project, and approved by PRHC, addressed to Firematic Phils. (folder of
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 exhibits, vol. II, p. 19). TASCEc

7. Exhibit "D."

8. Exhibit "14"; folder of exhibits, vol. III, p. 109.

9. Exhibit "L"; folder of exhibits, vol. II, pp. 33-38.

10. Exhibit "2"; folder of exhibits, vol. III, pp. 1-49.

11. Exhibit "2"; folder of exhibits, vol. III, pp. 40-41.

12. Exhibit "8"; folder of exhibits, vol. III, p. 103.

13. Exhibit "4"; folder of exhibits, vol. III, pp. 50-98.

14. Exhibit "4-G"; folder of exhibits, vol. III, p. 57.

15. Exhibit "E"; folder of exhibits, vol. II, pp. 20-22.

16. Exhibit "18"; folder of exhibits, vol. III, pp. 114-140.

17. Exhibit "14-M"; folder of exhibits, vol. III, p. 127.

18. Exhibit "EE", folder of exhibits, vol. IV, pp. 40-42.

19. Folder of exhibits, vol. IV, p. 41.

20. Exhibit "G"; folder of exhibits, vol. II, p. 25.

21. Exhibit "W"; folder of exhibits, vol. II, p. 55.

22. Exhibit "35."

23. Exhibit "37"; folder of exhibits, vol. III, p. 161.

24. Exhibit "I."

25. Exhibit "7"; folder of exhibits, vol. III, pp. 101-102.

26. TSN, September 9, 1995, p. 55.

27. Folder of exhibits, vol. II, p. 45.

28. Exhibit "39"; folder of exhibits, vol. III, p. 165.

29. Exhibit "I"; folder of exhibits, vol. II, p. 27.

30. Exhibit "J"; folder of exhibits, vol. II, pp. 28-31.

31. Embodied in a letter dated January 25, 1995; Exhibit "22"; folder of exhibits, vol. III, p.
143.
32. Exhibit "13"; folder of exhibits, vol. III, p. 108.

33. TSN, March 4, 1996, p. 35.

34. Exhibit "10"; folder of exhibits, vol. III, pp. 104-105.

35. Exhibit "12"; folder of exhibits, vol. III, p. 107.

36. Exhibit "23"; folder of exhibits, vol. III, p. 144.

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 37. TSN, April 17, 1996, p. 54.

38. Records, pp. 1-6.

39. Records, p. 5.

40. Id. at 46-55.

41. Id. at 85-90.
42. Id. at 313-316.
43. Id. at 331-339.
44. The Amended Answer contained the following prayer:

WHEREFORE, defendant prays that after trial, the Honorable Court renders a Decision:
1. Ordering the dismissal of the complaint as against the defendant;

2. Ordering plaintiff to pay defendant:

2.1. Actual damages as follows:

a. P1,485,000.00 representing the amount of overpayment under the Sprinkler System
Contract;

b. $61,925.00 representing the purchase price of the genuine PEERLESS fire pumps;
c. P318,750.00 representing the amount to install the replacement fire pumps;

d. P650,000.00 representing the amount of overpayment under the Fire Alarm System
Contract;
e. P450,000.00 representing the amount of supply and installation of replacement data
gathering panels.

2.2. Moral damages in the amount of P20,000,000;

2.3. Exemplary damages in the amount of P10,000,000;

2.4. Attorney's fees and expenses of litigation equivalent to 25% of the amount
recovered and such amounts as may be proved in the trial.

Other reliefs just and equitable in the premises are also prayed for.
45. Penned by Judge Eriberto U. Rosario, Jr., rollo, pp. 56-60.

46. Rollo, p. 60.

47. CA rollo, p. 52.

48. Id. at 22.

49. Id. at 118.
50. Id. at 113.
51. Id. at 114.
52. Id.

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 53. Id. at 117-118.
54. Id. at 122-136.
55. Id. at 221-233.
56. Id. at 367-372.
57. Id. at 372.
58. Id. at 19-20.
59. Id. at 22.
60. Id. at 160-161.
61. Union of Filipro Employees v. Vivar, Jr., G.R. No. 79255, January 20, 1992, 205 SCRA
200, 210; Franco v. Intermediate Appellate Court, G.R. No. 71137, October 5, 1989, 178
SCRA 331, 340.

62. Republic v. Guerrero, G.R. No. 133168, March 28, 2006, 485 SCRA 424, 438; Morandarte
v. Court of Appeals, G.R. No. 123586, August 12, 2004, 436 SCRA 213, 223.
63. Exh. "37"

64. Exh. "39"

65. Tin v. People, G.R. No. 126480, August 10, 2001, 362 SCRA 594, 602; De la Torre v.
Court of Appeals, 381 Phil. 819, 829 (2000).
66. Alba v. Court of Appeals, G.R. No. 164041, July 29, 2005, 465 SCRA 495, 510: De la
Torre v. Court of Appeals, supra.
67. People v. Valero, 112 SCRA 661, 675; cited in De la Torre v. Court of Appeals, supra.
68. Hanopol v. Shoemart, Incorporated, G.R. No. 137774, October 4, 2002, 390 SCRA 439,
454.
69. TSN, October 9, 1995, pp. 55-63.

70. Exh. "R"; folder of exhibits, vol. II, p. 45.

71. Department of the Interior and Local Government, Bureau of Fire Protection, Pasig Fire
Station II.

72. Otherwise known as the FIRE CODE OF THE PHILIPPINES.

73. REVISED RULES OF COURT, Rule 131, Section 3 (p).

74. REVISED RULES OF COURT, Rule 131, Section 3 (q).

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